Opinion
NO. 02-15-00017-CV
03-31-2016
CITY OF COLLEYVILLE AND CITY OF KELLER APPELLANTS v. MICHAEL S. NEWMAN APPELLEE
FROM COUNTY COURT AT LAW NO. 3 OF TARRANT COUNTY
TRIAL COURT NO. 2014-005143-3 MEMORANDUM OPINION
See Tex. R. App. P. 47.4.
Appellants City of Colleyville and City of Keller (collectively, the Cities) appeal the trial court's order denying their plea to the jurisdiction by which they sought dismissal of a lawsuit brought by Appellee Michael S. Newman, a municipal court judge for the Cities. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(8) (West Supp. 2015). On appeal, the Cities argue the trial court erred by denying their plea to the jurisdiction because (1) there could be no waiver of immunity under section 271.152 of the local government code because Newman pled no facts to support his breach of contract claim; (2) alternatively, assuming section 271.152 applies, Newman pled no facts to establish a waiver of the Cities' immunity; and (3) the trial court did not have jurisdiction to award Newman any damages or relief, equitable or otherwise, under the facts as pled by Newman. See Tex. Loc. Gov't Code Ann. § 271.152 (West 2005). We reverse and render judgment dismissing Newman's claims against the Cities for lack of jurisdiction.
Background
On August 21, 2012, the city councils for the Cities appointed Newman to be a regional municipal court judge for the Cities for a two-year term commencing October 1, 2012. Newman and the Cities executed a "Regional Municipal Court Judge Agreement" that set forth Newman's duties and responsibilities as municipal court judge and provided that he would be paid $4,615.38 biweekly as compensation for his services. The agreement further provided that "[n]o other compensation or benefits shall be paid to the Regional Municipal Court Judge" and that the "[p]arties shall comply with all provisions of the Internal Revenue Code, as amended." Pursuant to the terms of the agreement, the City of Colleyville made fifty-two payments of $4,615.38 to Newman on a biweekly basis from October 13, 2012, to October 2, 2014.
During the term of the agreement, the City of Colleyville sought a determination from the Internal Revenue Service (IRS) regarding the IRS's position as to whether Newman was an employee for income tax withholding purposes. The IRS concluded that Newman was an employee for federal income tax withholding purposes. When Newman learned of the IRS's determination, he demanded that the Cities provide him with employment benefits, specifically health insurance. The Cities refused, and they continued to claim that Newman was a "contract labor" employee or an independent contractor.
A week prior to the expiration of the agreement, Newman filed a declaratory judgment action against the Cities, claiming that the parties were mutually mistaken as to his classification as an independent contractor or, in the alternative, that the Cities intentionally misclassified Newman as an independent contractor with the intention of depriving him of payroll deductions, Federal Income Contributions Act (FICA) and Medicare contributions, worker's compensation benefits, sick leave, vacation time, health and life insurance, and other employment benefits available to the Cities' employees. Newman sought a declaration that he was an employee of the City of Colleyville and the City of Keller, that he was a shared employee of the Cities, that he was qualified to receive employment benefits from the Cities, and that the agreement was voidable and unenforceable due to mutual mistake because it attempted to misclassify Newman's employment status and because it "attempt[ed] to commit wage theft." Newman also sought costs and attorney's fees. See Tex. Civ. Prac. & Rem. Code Ann. § 37.009 (West 2015).
The Cities filed a plea to the jurisdiction, asking the trial court to dismiss the suit because, as municipalities, the Cities were entitled to governmental immunity and Newman had failed to plead a waiver of the Cities' governmental immunity and had failed to demonstrate the factual applicability of any such waiver. Newman responded that the Cities had waived immunity pursuant to local government code section 271.152 because (1) the Cities were local governmental entities as defined by the local government code, (2) the Cities were authorized by statute or the constitution to enter into the agreement, and (3) the agreement was subject to chapter 271 of the local government code. See Tex. Loc. Gov't Code Ann. § 271.152. Newman also amended his petition to delete his requests for declaratory relief and to assert a claim for breach of contract, contending that the Cities breached the agreement by failing to provide him with all the statutory and contractual rights afforded to employees. Newman alleged in the alternative that the parties were mutually mistaken as to his employment classification and alleged in the further alternative that the Cities intentionally misclassified his employment status with the intention of committing "wage theft." Newman pled for actual damages, attorney's fees, prejudgment and postjudgment interest, and court costs. After a hearing, the trial court denied the Cities' plea, and the Cities appealed.
Plea to the Jurisdiction
A governmental entity may assert its immunity from suit in a plea to the jurisdiction. See Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 225-26 (Tex. 2004) ("Sovereign immunity from suit defeats a trial court's subject matter jurisdiction and thus is properly asserted in a plea to the jurisdiction."). In its plea, the defendant bears the burden "to establish that it is a governmental entity entitled to governmental immunity." Lubbock Cty. Water Control & Improvement Dist. v. Church & Akin, L.L.C., 442 S.W.3d 297, 305 (Tex. 2014); see Miranda, 133 S.W.3d at 228 (requiring "the [governmental entity] to meet the summary judgment standard of proof"). If the governmental entity meets its burden, the burden shifts back to the plaintiff "to establish, or at least raise a fact issue on, a waiver of immunity." Church & Akin, 442 S.W.3d at 305; see Miranda, 133 S.W.3d at 227-28.
Standard of Review
We review a plea challenging the trial court's jurisdiction de novo. State v. Holland, 221 S.W.3d 639, 642 (Tex. 2007). We first look to the pleadings to determine if the pleader has alleged facts that affirmatively demonstrate the court's jurisdiction to hear the cause. Miranda, 133 S.W.3d at 226. We construe the pleadings liberally in favor of the plaintiff, look to the pleader's intent, and accept as true the factual allegations in the pleadings. Id. When a plea to the jurisdiction challenges the existence of jurisdictional facts, we consider relevant evidence submitted by the parties. See id. at 227. The standard of review for a jurisdictional plea based on evidence "generally mirrors that of a summary judgment under Texas Rule of Civil Procedure 166a(c)." Id. at 228. Under this standard, we credit evidence favoring the nonmovant and draw all reasonable inferences in the nonmovant's favor. See id. The defendant must assert the absence of subject-matter jurisdiction and present conclusive proof that the trial court lacks subject-matter jurisdiction. Id. If the defendant discharges this burden, the plaintiff must present evidence sufficient to raise a material issue of fact regarding jurisdiction, or the plea will be sustained. Id.
Waiver of Governmental Immunity
As municipalities, the Cities are local governmental entities. See Tex. Loc. Gov't Code Ann. § 271.151(3)(A) (West Supp. 2015); Tooke v. City of Mexia, 197 S.W.3d 325, 345 (Tex. 2006) ("A local governmental entity is defined to include a municipality."). Local governmental entities are immune from suit unless immunity is expressly waived. Church & Akin, 442 S.W.3d at 300. Governmental immunity includes both immunity from liability, which bars enforcement of a judgment against a governmental entity, and immunity from suit, which bars suit against the entity altogether. Id. A governmental entity that enters into a contract necessarily waives immunity from liability, voluntarily binding itself like any other party to the terms of agreement, but it does not waive immunity from suit. Id. Unlike immunity from liability, immunity from suit deprives the courts of jurisdiction and thus completely bars a plaintiff's claim. Id.
The Local Government Contract Claims Act (the Act) waives a local governmental entity's immunity from suit in certain breach of contract claims. See Zachry Constr. Corp. v. Port of Houston Auth. of Harris Cty., 449 S.W.3d 98, 106-07 (Tex. 2014) (citing Tex. Loc. Gov't Code Ann. §§ 271.152, .153 (West Supp. 2015)). Section 271.152 states:
A local governmental entity that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this subchapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of the contract, subject to the terms and conditions of this subchapter.Tex. Loc. Gov't Code Ann. § 271.152. A "contract subject to this subchapter" includes "a written contract stating the essential terms of the agreement for providing goods or services to the local governmental entity that is properly executed on behalf of the local governmental entity." Id. § 271.151(2)(A) (West Supp. 2015). The parties do not dispute that the agreement qualifies as a "contract subject to this subchapter." See id.
The "terms and conditions of this subchapter" referred to in section 271.152 include the limitations on awards set out in section 271.153:
(a) Except as provided by Subsection (c), the total amount of money awarded in an adjudication brought against a local governmental entity for breach of a contract subject to this subchapter is limited to the following:
(1) the balance due and owed by the local governmental entity under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or acceleration;
(2) the amount owed for change orders or additional work the contractor is directed to perform by a local governmental entity in connection with the contract;
(3) reasonable and necessary attorney's fees that are equitable and just; and
(4) interest as allowed by law, including interest as calculated under Chapter 2251, Government Code.
(b) Damages awarded in an adjudication brought against a local governmental entity arising under a contract subject to this subchapter may not include:
(1) consequential damages, except as expressly allowed under Subsection (a)(1);
(2) exemplary damages; or
(3) damages for unabsorbed home office overhead.
Id. § 271.153; see Zachry Constr., 449 S.W.3d at 106-07.
(c) Actual damages, specific performance, or injunctive relief may be granted in an adjudication brought against a local governmental entity for breach of a contract described by Section 271.151(2)(B).
We cannot construe a statute to waive immunity "unless the waiver is effected by clear and unambiguous language." Tex. Gov't Code Ann. § 311.034 (West 2013); see Tooke, 197 S.W.3d at 328-29 (agreeing that statutory waiver of immunity must be "by clear and unambiguous language"). If a statute seeks to waive immunity, it "must do so beyond doubt." Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692, 697 (Tex. 2003). In Zachry Construction, the supreme court considered whether "the Act's limitations on recovery help define and restrict the scope of waiver of immunity." 449 S.W.3d at 105. The supreme court stated that "Section 271.152 must be read as follows: 'A local governmental entity . . . waives sovereign immunity to suit . . . subject to the terms and conditions' of the Act." Id. at 108. "Section 271.153's limitations on recovery are incorporated into Section 271.152 by its last 'subject to' clause and are thereby conditions on the Act's waiver of immunity." Id. at 109. The court therefore concluded that "the Act does not waive immunity from suit on a claim for damages not recoverable under Section 271.153." Id. at 110. Thus, under Zachry Construction, in order for the trial court to have jurisdiction over a contract claim asserted against a local governmental entity, the plaintiff must establish "a demand for certain kinds of damages" as limited by section 271.153. Id. at 109. Waiver of immunity under the Act "require[s] a showing of a substantial claim that meets the Act's conditions," which requires that "the claimant must plead facts with some evidentiary support that constitute a claim for which immunity is waived." Id. at 109, 110 (citing Miranda, 133 S.W.3d at 226-28).
Analysis
By their second issue, the Cities argue that Newman failed to plead a valid waiver of immunity under the local government code because he failed to plead damages that are recoverable under section 271.153. See Tex. Loc. Gov't Code Ann. § 271.153. Newman responds that by his breach of contract claim, he seeks to recover employment benefits, such as income tax withholding, FICA and Medicare contributions, vacation pay, sick pay, retirement benefits, insurance benefits, and other benefits offered in writing to employees of the City of Colleyville, which he contends are direct damages for amounts "due and owed" under the agreement. See id. § 271.153(a)(1). He contends that, therefore, the Cities' immunity is waived under section 271.152. See id. § 271.152.
The municipal court staff were employed by the City of Colleyville.
As explained above, the supreme court has determined that in a breach of contract action, immunity from suit is not waived on a claim for damages not recoverable under section 271.153. See Zachry Constr., 449 S.W.3d at 110. Section 271.153(a)(1) limits the total amount of money awarded in an adjudication brought against a local governmental entity for breach of a contract to "the balance due and owed by the local governmental entity under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or acceleration." Tex. Loc. Gov't Code Ann. § 271.153(a)(1). Relying on the IRS's determination that Newman was an employee for federal income tax purposes, Newman contends the Cities breached the agreement and owe him the additional benefits and compensation that would be owed to an employee. Newman relies on Zachry Construction to argue that the benefits and additional compensation to which he would be entitled as an employee was "the balance due and owed" under the agreement.Zachry Construction is distinguishable from this case because section 271.153(a)(1) expressly allows for the recovery of damages for "owner-caused delays," the precise claim for damages for which Zachry Construction sought recovery. See Tex. Loc. Gov't Code Ann. § 271.153(a)(1); Zachry Constr., 449 S.W.3d at 103-04, 110-14. The court also held that the no-damages-for-delay clause in the contract was unenforceable as a matter of public policy to prevent recovery of such damages that the jury found were caused by the deliberate, wrongful conduct of the Port of Houston Authority. Zachry Constr., 449 S.W.3d at 114-18.
Municipal court judges are not employees of the municipalities they serve. See Tex. Gov't Code Ann. § 30.00006(g) (West 2004) ("A person may not serve as a municipal judge if the person is employed by the same municipality. A municipal judge who accepts employment with the municipality vacates the judicial office."); City of Roman Forest v. Stockman, 141 S.W.3d 805, 809-10 (Tex. App.—Beaumont 2004, no pet.) (holding that a municipal court judge is not within the definition of "public employee" in the Texas Whistleblower Act); Thompson v. City of Austin, 979 S.W.2d 676, 680-83 (Tex. App.—Austin 1998, no pet.) (holding that a municipal court judge is not an employee but a public official who is not covered under the Texas Commission on Human Rights Act).
In the trial court, Newman asserted that section 271.153(c) allowed recovery for "actual damages" of any kind resulting from a breach of contract. See Tex. Loc. Gov't Code Ann. § 271.153(c). That subsection, however, applies only to written contracts regarding the sale or delivery of not less than 1,000 acre-feet of reclaimed water by a local governmental entity intended for industrial use. See id. §§ 271.151(2)(B) (West Supp. 2015), .153(c).
Here, in contrast, the agreement expressly barred recovery by Newman of any additional benefits and compensation over and above the amount the Cities agreed to pay and paid over the course of the agreement, and Newman has cited no reason why that provision would be unenforceable. Thus, there is no balance "due and owed" by the Cities under the agreement because the Cities paid Newman all compensation owed under the agreement and because the agreement expressly stated that no other compensation or benefits shall be paid to Newman. See id. ("A 'balance due and owed . . . under the contract' is simply the amount of damages for breach of contract payable and unpaid."). Because Newman has not and cannot plead facts with some evidentiary support that constitute a breach of contract claim for which immunity is waived under the Act, we conclude the Cities' immunity from Newman's breach of contract claim has not been waived.See id. at 109-10. Accordingly, the trial court erred by denying the Cities' plea to the jurisdiction, and we therefore sustain the Cities' second issue. Having concluded that the Cities' immunity from Newman's breach of contract claim has not been waived, we need not address the Cities' remaining issues. See Tex. R. App. P. 47.1.
To the extent that Newman's assertions that the parties were mutually mistaken as to his employment classification and that the Cities intentionally misclassified his employment status with the intention of committing "wage theft" constitute claims independent of his breach of contract claim, Newman did not assert in the trial court nor does he assert on appeal any basis for waiver of the Cities' immunity other than section 271.152, which, by its terms, only waives immunity for certain breach of contract claims. See id. § 271.152. --------
Conclusion
For the reasons stated above, we reverse the trial court's order denying the Cities' plea to the jurisdiction and render judgment dismissing Newman's claims against the Cities for lack of jurisdiction. See Tex. R. App. P. 43.2(c), 43.3.
/s/ Anne Gardner
ANNE GARDNER
JUSTICE PANEL: GARDNER, MEIER and GABRIEL, JJ. GABRIEL, J., filed a concurring opinion in which MEIER, J., joins. DELIVERED: March 31, 2016